The long-term goal of the proposed studies is to understand how cells are specified to form the inner ear. The inner ear arises from a specialized set of cells, the otic placode that forms at the lateral edge of the neural plate adjacent to the hindbrain. The otic placode, like other cranial placodes, is thought to arise from a common precursor pool called the preplacodal ectoderm. Fgf signals from the early mesendoderm and later from the hindbrain are required to specify the otic placode, however it is currently unknown how cells are allocated to the preplacodal ectoderm or how they respond to the inductive signals that trigger their differentiation into the ear. Previous studies showed that Bmp signaling, in addition to Fgf signaling, is required for specification of the otic placode and that the Fgf and Bmp signaling pathways converge on a set of transcription factors, notably Dlx3b, Sox9a, and Foxi1, that mediate induction and differentiation of the otic primordium. Mutations or haploinsufficiency of FOXI1 or SOX9 in humans can lead to abnormal inner ear development and conductive hearing loss. The proposed study will test the hypothesis that these factors function as a molecular switch that triggers otic induction, changing the sensitivity of preotic cells from low to high Fgf sensitivity, and that this switch is regulated by a balance between Bmp and Fgf signals. The proposed studies will provide the first comprehensive explanation of the mechanisms underlying otic induction. 1. The proposed studies will test whether Bmp and Foxi1 form a positive regulatory loop to maintain Dlx3b expression in cells that form the preplacodal ectoderm. They will examine whether altering Bmp signaling or Foxi1 activity alters Dlx3b expression and subsequent preplacodal ectoderm formation. These experiments will elucidate the mechanism that underlies initial patterning of the preplacodal ectoderm. 2. The proposed studies will test whether Foxi1 directs cells to form the preplacodal ectoderm by differentially regulating their responses to Bmp and Fgf signaling. They will examine whether altering Foxi1 activity alters Fgf and/or Bmp receptor expression and downstream pathways. These experiments will explain how the balance between Fgf and Bmp signals is sensed and maintained. 3. The proposed studies will test whether Sox9a and Foxi1 function as a molecular switch that triggers otic induction by altering the activities of Foxi1 and Sox9a and examining the resulting effects on Fgf sensitivity and otic specification as indicated by marker expression and placode and vesicle formation. These experiments will elucidate the central mechanism of otic induction. The proposed studies of foxi1 and sox9a have direct relevance to human health. Enlarged vestibular aqueduct (EVA), the most common form of inner ear abnormality in humans, can be caused by digenic inheritance of a heterozygous mutation in the SLC26A4 gene and a heterozygous mutation in the FOXI1 gene. EVA is associated with fluctuating and sometimes progressive sensorineural hearing loss and disequilibrium. Haploinsufficiency in SOX9 leads to campomelic dysplasia with complications that include conductive hearing loss.